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BK settles with franchisees over value menu

Franchisor agrees to set new policy for deciding what goes on the value menu

Burger King and its franchisee group have agreed to change how new items are added to the chain’s value menu, settling a lawsuit that was sparked by a $1 double cheeseburger promotion in 2009.

Burger King Holdings Inc. and the National Franchisee Association, whose members represent around 80 percent of the chain’s franchised units in the United States, reached the settlement late last week. As part of the settlement, Burger King said in a statement Monday that it would issue “a new system-wide policy for making BK Value Menu decisions.”

“With the issuance of the new policy and the dismissal of the lawsuit, BKC, the NFA and the franchise litigants now look forward to building a stronger and more collective relationship,” Burger King said in its statement.

Tony Versaci, chairman of the Atlanta-based National Franchisee Association, told Nation’s Restaurant News on Monday that the settlement allows franchisees to have more of a voice on what items get placed on the value menu.

Burger King will “make a business case to add something to the value menu and the franchisee community will get to vote on it,” said Versaci, who also is president and chief executive of Multi King Corp. of Michigan and Illinois, which owns 17 Burger King units in those two states.

He added that the company will use “new metrics” as part of the process of proposing items for the value menu and their prices.

The NFA filed its lawsuit against Burger King in November 2009, contesting the franchisor’s authority to set maximum menu prices. At issue was a promotion for a double cheeseburger, which franchisees were required to sell for $1 from October 2009 to April 2010.

Franchisees said at the time they were losing a dime or more on the sandwich.

Versaci said Monday that the settlement was fair, though both sides emerged with “reservations,” which he declined to describe.

“Whenever you have a legal dispute and there’s a resolution and you have one side that is excited and one side that is bummed, it probably was a [bad] settlement. In this case, both sides had reservations, but now we can get this behind us,” he said.

The settlement comes at a time of transition for Burger King, which was acquired last fall by private-equity firm 3G Capital. Co-chairman John W. Chidsey, who had served as CEO before the buyout, resigned Monday, making him the latest of several executives to leave the company in recent months. In addition, Burger King parted ways last month with longtime advertising agency Crispin Porter + Bogusky.

Burger King has also struggled to gain sales traction, posting a 5.8-percent drop in same-store sales in the United States and Canada for the fourth quarter of 2010. Miami-based Burger King operates or franchises 12,251 restaurants worldwide.

Following the settlement, the National Franchisee Association said in a statement Monday that it looked forward to working with Burger King’s leadership team.

“We now have a path forward,” the NFA said in its statement. “The path includes open dialogue, a renewed commitment to building the BK brand, and more dedication to customer service than ever before. This is how we all will grow and be profitable.”

Contact Alan Snel at [email protected].

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